Are Foreign Enterprises Being Targeted?

The past year has seen a steady stream of stories about foreign companies in China being under investigation for regulatory violations and/or outright corruption. The offices of Microsoft were raided. Japanese, German, and American automakers are being probed. Two British nationals working for GlaxoSmithKline were recently jailed. And a Canadian couple that ran a business in the border region near North Korea has been detained on suspicion of stealing state secrets.

Is it coincidence, or part of a concerted effort to go after foreign companies? As with most things in China, it's impossible to know exactly what is going on, but there is a feeling among the foreign business community that foreign companies are being targeted.

On September 2, The American Chamber of Commerce in China (AmCham) released a paper titled "Challenges and Opportunities in China's Investment Environment: 2014." Among other things, it included results of a survey that indicated that AmCham members do believe that foreign businesses are being unfairly targeted:

The report's release comes amid heightened interest in foreign multinational corporations from both the government and media. To reassess its members' sentiment, the chamber conducted a short survey at the end of August that repeated some of the questions asked in the annual Business Climate Survey it held late last year. The results showed that 60 percent of respondents feel foreign business is less welcome in China than before, and 49 percent believe foreign firms are being singled out in recent pricing or anti-corruption campaigns.

"Our members have been and remain enthusiastic supporters of China's integration into the global economy, but sadly this survey suggests that their positive sentiment is eroding," Gilligan said. "Our concern is that if the investment environment deteriorates too far, important relationships and linkages between China and the rest of the world will be materially damaged, seriously impairing China's ability to attract the investment that will be crucial in taking the country to the next stage of economic development.

"We still believe that China's economy will emerge from this difficult period stronger than before, and US companies in particular have a great deal to offer in the services sector so crucial to the economy's transformation. We will be closely watching the upcoming Fourth Plenum, and hope to see concrete moves toward creating a society based on the rule of law, rather than rule by law," Gilligan said.

So the perception abroad in the land is that the business environment is becoming less friendly to foreign businesses. It's probably reasonable to expect that some, if not many, in the NGO/Ministry community share this sentiment as well.

Which means that now would be a good time to make sure that all your legal ducks are in a row.

Photo Credit: Google in Beijing, by Cory M. Grenier, via Flickr